NEW YORK (TheStreet) -- Nam Tai Electronics (NYSE:NTE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- Net operating cash flow has decreased to $10.67 million or 31.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for NAM TAI ELECTRONIC is currently extremely low, coming in at 11.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.20% trails that of the industry average.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- NTE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover short-term cash needs.
- NTE's very impressive revenue growth greatly exceeded the industry average of 45.0%. Since the same quarter one year prior, revenues leaped by 77.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
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